Excise Tax in the UAE
At Business Tax in UAE (BTU), our professional tax experts help businesses navigate the UAE Excise Tax regime and their responsibilities thereunder. Our experts provide practical and dependable assistance whether you are registering for Excise Tax, submitting monthly returns, responding to FTA inquiries or for guidance on some specific compliance issues.
This comprehensive FAQ addresses the most frequently asked questions businesses have concerning Excise Tax in the UAE and explain the most recent legal provisions and FTA regulations.
What is Excise Tax in the UAE?
The tax is imposed at the point of release for consumption in the UAE and is calculated on the excise price of the good (for ad valorem goods) or on a volumetric basis (for sweetened drinks), as defined in relevant Cabinet Decisions. The tax is imposed and collected by the Federal Tax Authority (FTA) on the buyers of the goods.
Which Goods Are Subject to Excise Tax in UAE?
| Excise Goods Category | Examples (AED) | Tax Rate |
|---|---|---|
| Tobacco Products | Cigarettes, cigars, pipe tobacco, shisha tobacco, heated tobacco products | 100% |
| Electronic Smoking Devices | E-cigarettes, vape devices, electronic smoking tools | 100% |
| Liquids for E-Smoking Devices | Vape liquids, nicotine liquids, non-nicotine refill liquids | 100% |
| Energy Drinks | Drinks containing caffeine, taurine, guarana, or similar stimulants | 100% |
| Carbonated Drinks | All carbonated beverages except those excluded by law | 50% (subject to updates) |
| Sweetened Drinks | Beverages with added sugar or sweeteners | Tiered volumetric model (AED per litre based on sugar content) |
Who Must Register for Excise Tax in UAE?
What is a Designated Zone?
Businesses that own or operate Designated Zones, such as warehouse keepers, have to adhere to strict FTA provisions regarding inventory tracking, record-keeping, reporting, security, and audits.
Failure to comply could result in immediate tax liability and penalties. Importers, producers, and distributors of excise goods — tobacco, energy drinks, sweetened beverages, electronic smoking devices — rely on Designated Zones to efficiently defer tax.
How to Register for Excise Tax in UAE
When Must Excise Tax Returns Be Filed?
Why Choose Business Tax in UAE (BTU) for Excise Tax Services?
Excise Tax FAQ'S
Q1. What documents are needed for Excise Tax registration?
Typical requirements include:
- Certificate of Incorporation, Memorandum of Association, or Partnership Agreement (if applicable)
- Valid Trade License / Business License
- Emirates ID and Passport of the authorized signatory
- Proof of authorization for the authorized signatory
- Official declaration, on the entity’s printed letterhead, signed and stamped by the authorized signatory, stating the entity’s activity in relation to goods subject to Excise Tax, in addition to the activity type (production, import, stockpiling, release of excise goods from the designated zone) and the start date of the activity.
- Supporting documents such as invoices, local purchase orders, and contracts, as applicable based on the request type.
- Bank letter validating the bank account details for the registrant.
- Any other related documents.
BTU ensures complete and accurate submissions to avoid delays.
Q2. How is Excise Tax calculated?
Excise Tax is levied on the excise category. The tax is measured on an ad valorem basis (% of the excise price) or on a volumetric basis (AED per litre), per category as per applicable Cabinet Decision No. 52 of 2019 and its subsequent updates for sweetened drinks. Rates are:
- 100% on tobacco, energy drinks, electronic cigarettes and liquids (both consumable and non-consumable);
- 50% on carbonated drinks (subject to upcoming changes);
- Tiered volumetric rates for sweetened drinks (effective in 2026).
The excise price (for percentage-based goods) is generally the cost of production or importation plus a reasonable profit. Tax is payable on the release of taxable goods for consumption in the UAE, including the release of goods in any designated zone. Accurate records of costs, quantities, and movements are mandatory. BTU helps ensure that tax is calculated and paid correctly, and recorded accurately, to avoid penalty fines.
Q3. Can I claim refunds on Excise Tax?
Unlike VAT, Excise Tax is generally paid only once in the supply chain. This means businesses that purchase excise goods usually cannot claim a refund for the tax they paid.
However, refunds are possible in limited specific cases:
- When excise goods are used to produce a new excise good (on which excise tax becomes due again).
- When excise goods are exported outside the UAE.
- When tax has been overpaid to the FTA by mistake.
In these cases, a registered business can claim a refund. The refund is usually deducted from the tax payable in the next Excise Tax return. Specific rules apply for exports, designated zones, and overpayments. Contact us today for detailed guidance.
Q4. When is Excise Tax due?
Excise Tax is due when goods are ‘released for consumption’ i.e. when they enter free circulation in the UAE. Excise tax is due when:
- Excise goods are imported into the UAE;
- Excise goods are released for consumption in the UAE (e.g. manufactured and released from a designated zone/excise warehouse etc); or
- Excise goods are acquired by a stockpiler, where tax has not previously been paid on these goods.
Q5. What are the penalties for non-compliance?
The penalties include fixed penalties (such as for filing/registration of documents on time), percentage penalties, and may also include banning of activities. The FTA also carries out investigations, and professional advisers can help to address the reconsiderations and disputes.
Q6. Do Free Zone businesses need to register?
Yes if they import, produce or release excise goods for consumption in the UAE mainland. Special rules for travel between mainland and zones.